Idea is set to take a Rs 300-crore hit on account of cut in IUC

KOLKATA: The 57% cut in interconnect usage charges ( IUC) will hit Idea Cellular’s operating income by some Rs 300 crore over the next six months but the No. 3 carrier expects the impact to be partly offset by the growing popularity of its recently launched Rs 179 per month unlimited voice plan.

At an earnings call on the company’s fiscal second quarter results earlier this week, Idea managing director Himanshu Kapania is believed to have further said that Idea won’t be shutting off its 3G services any time soon, as the technology offers a back-up for its voice services in many service areas.

Idea is “very bullish” on the new `179/month (unlimited voice) plan, which it hopes will help improve the outgoing call percentage, and in turn, reduce the estimated `300 crore Ebitda (earnings before interest, tax, depreciation & amortization) loss over the next six months, “triggered by the fall in IUC”, Kapania is believed to have said, according to analysts present on the call. Idea’s Rs 179/month plan offering unlimited voice and 1GB data, he said, is focused on voice customers who also use some data, and is expected to “be value accretive”, he said.

Brokerage PhillipCapital backed the view, saying introduction of Idea’s new plans, with unlimited voice at `179/month, “is seeing a lot of 2G and 3G subscriber interest, and the management believes there will be more subscribers upgrading to unlimited voice plans that should be ARPU accretive”.

Interconnect charges are paid by a telco on whose network a call originates to the one on which it terminates. Top incumbent carriers — Airtel, Vodafone and Idea — will be the biggest revenue losers, post IUC cut from October 1, as they have the most number of subscribers and garner a majority share of IUC as most calls originate on their networks.

Bharti Airtel, which recently said it would be shutting off its 3G services over 3-4 years, too had said at a recent earnings call that the steep cut in interconnect charges would hurt its consolidated Ebitda by as much as 4% in the December quarter.

Further, Kapania is believed to have said that Idea’s immediate priority in the run-up to its mega merger with Vodafone India is expanding 4G coverage using airwaves in the 2,300 MHz and 2,500 MHz bands, and also re-farming spectrum in the 900 MHz band also for 4G services.

Once the merger with Vodafone “becomes a reality”, the merged entity, he said, would have 900 MHz spectrum in 17 out of the 22 circles, and in some markets would hold 8.5-9 units of such airwaves, which would be adequate for running both 2G and 4G networks.